Singapore economy shows signs of hope as trade war drags on

11-Sep-2019 Intellasia | Bloomberg | 6:02 AM Print This Post

Singapore’s economy boosted by firms trying to beat new US tariffs on China, shift in business from Hong Kong.

It may not be all doom and gloom for Singapore’s economy.

Recent data and anecdotal evidence suggest gross domestic product will probably grow in the third quarter after shrinking in the previous three months, according to economists including Chua Hak Bin at Maybank Kim Eng Research Pte. and Barnabas Gan at United Overseas Bank Ltd

That would mean the city state will narrowly avoid a technical recession, commonly defined as two consecutive quarters of contraction.

Even so, there’s little to cheer about. Economists have slashed their 2019 growth forecasts for the export-reliant economy as the US-China trade war intensifies. Singapore’s government is projecting growth of zero to 1 percent for the year.

Irvin Seah, a senior economist at DBS Group Holdings Ltd, said he isn’t optimistic about the country’s prospects even if the economy avoids a technical recession. He predicts expansion of just 0.7 percent for the full year.

Maybank cites three main reasons for the mild improvement, which it says should help boost Singapore’s services output and offset the slump in manufacturing:

Front-Loading Orders

Businesses may be front-loading some orders before the US slaps a 15 percent tariff on Chinese consumer goods, like mobile phones and laptops, in December. Also, there are signs that a slump in technology exports, which had been a drag on manufacturing, is starting to ease. Singapore’s July data reflected some of that rebound, with industrial production posting a far better performance than economists had predicted.

Loan Growth

Singapore’s financial centre is benefiting as more businesses finance their regional projects via lenders based in the city state. Offshore loans rose 7 percent in July from a year ago, while domestic lending grew 2 percent. The strongest growth in offshore loans was in construction and manufacturing, surging 18 percent and 15 percent respectively.

Hong Kong Diversion

Protests and disruptions in Hong Kong have pushed leisure and business tourism to Singapore. Visitor arrivals grew 4 percent in July from a year ago, the fastest pace in 9 months, with hotel occupancy rising to 94 percent, the highest level ever for July, according to data from the Singapore Tourism Board. Despite a regional drop in Chinese tourists, Singapore-bound visitors from China rose 7.8 percent in July from a year ago, while tourists from the US rose 17 percent and from Indonesia, 12 percent.

Singapore may benefit as more business events and conferences are diverted from Hong Kong, said Maybank, citing the Golden Wellness Summit planned for October, which was moved from Hong Kong to Singapore, and other events.


Category: Singapore

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